It’s fair to say the UK was not holding its breath for unexpected treats from the Chancellor in this year’s Budget. And, in the main, we were absolutely right.
George Osborne used the Budget as something of a band aid – with a view to keeping things ticking along until he makes more significant moves, perhaps this autumn. The Brexit referendum is fast approaching and uncertainty is rife. Not the best time to be making important economic decisions.
But the chancellor did announce some significant tax allowance changes, affecting landlords and buy-to-let investors.
From April 2016, the higher rate of Capital Gains Tax will be cut, from 28 percent down to 20 percent. And the basic rate will reduce from 18 percent down to 10 percent.
This is key because CGT is charged on the profit from the sale of assets – like a business, shares or a second home – if that profit is more than an individual’s current CGT allowance.
“There are some significant exemptions to the planned changes though,” said Rob Dolbear, Managing Director of HCR. “As things stand, if you sell a residential property that is not your main home, you’ll have to pay tax at the previous higher rates.
“In essence, if someone were to sell a second property for £50,000 profit, they will be left with £41,000 if they’re a basic rate taxpayer – or £36,000 if they’re charged at the higher rate. In contrast, those reaping equal profit in the sale of shares would get to keep £45,000 or £40,000 respectively.
“George Osborne’s revisions will certainly be welcomed by those buying and selling stocks and shares – but landlords and buy-to-let investors will be less than impressed. It seems this is an attempt by the Government to provide an incentive for people to plough their money into business, rather than property.”
During last year’s Autumn Statement, the Chancellor announced changes to Stamp Duty – including a three percent surcharge for those buying second homes or additional properties.
“It was thought by many that these rules wouldn’t apply to ‘professional’ landlords – those who own more than 15 properties,” said Rob. “But this isn’t the case. George Osborne confirmed that ALL such investors will be paying more in Stamp Duty.
“The three percent rise comes into effect from 1 April 2016. This means anyone buying an additional property for, say, £250,000 will see their Stamp Duty bill rise from £2,500 to £8,800. The hope, as far as the Chancellor is concerned, is that the change will earn the Government an extra £1 billion by 2020.
“It’s too early to say just how deeply these developments will affect the buy-to-let industry – but these investors are crucial in terms of employee relocation and mobility. In all likelihood, the number of available properties will decrease and rents will rise, as landlords look to recoup their losses.
“In terms of relocation, whether you’re a landlord or are seeking out properties for your employees to rent, seeking out the best advice and guidance is more crucial than ever.”